Topic History of: Buy-Sell Agreements
Max. showing the last posts - (Last post first)
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bigdaddy
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yes, while there is a great deal of boiler plate language in a buy/sell, you need to make sure tha the clauses are tailored to your specific needs. Carefully read these things because the devil is in the details. Interview you clients carefully to make sure you get what they want and make sure they understand what the terms they are entering into mean to each of them.
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Jim C.
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That looks like a fairly complete buy/sell agreement, but don't you have to carefully tailor these things to fit the people involved? And, are you aware of any common traps when it comes to these things, what should one look out for?
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Samantha
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here is a BSA for an S-corp. Its boilerpate.
CORPORATE CROSS-PURCHASE AGREEMENT
STOCK BUY-SELL AGREEMENT
On [date], ADAM CLIENT, BEN SMITH, and CARLOTTA JONES entered into this Agreement (defined below) among themselves, and with the consent and agreement of ACME ENTERPRISES, INC., a [state] corporation (‟ACME”).
RECITALS:
A. The Shareholders (defined below) each own those shares of ACME's common stock indicated on Schedule A; and
B. The Shareholders wish to provide a market for their shares of the Stock (defined below) on their deaths; and
C. The Shareholders wish to restrict ownership of the Stock to the present Shareholders and to persons with whom they may comfortably and easily deal; and
D. The Shareholders believe that they shall be able to deal easily and comfortably with each other and that it is in their best interests and in ACME's best interests that all corporate activities be controlled by persons who deal comfortably with each other; and
E. The Shareholders and ACME, to accomplish these objectives, wish to arrange for certain restrictions on the Transfer (defined below) of the Shareholders' shares of the Stock to persons other than the parties to this Agreement.
AGREEMENTS:
SECTION 1
Stock Transfers
1.1. Stock Transfers Are Generally Restricted. The parties do not want shares of the Stock to be made generally available to persons other than the present Shareholders. Therefore, the parties agree that no Shareholder shall Encumber (defined below), Transfer, or permit to be Encumbered or Transferred all or any portion of his, her, or its shares of the Stock, whether now or hereafter acquired, except in accordance with the terms of this Agreement. Any attempted Encumbrance or Transfer of any shares of the Stock not in accordance with the terms of this Agreement shall not be valid and shall not be reflected on ACME's books.
1.2. Encumbrances, Purchase Option. A Shareholder may not Encumber any of his, her, or its shares of the Stock in connection with any debt, except pursuant to this subsection 1.2.
1.2.1. A Shareholder may Encumber any of his, her, or its shares of the Stock, if the person to whom would be owed the debt secured by such Encumbered shares of the Stock would, upon any default on such secured debt, be required to send a notice to each other Shareholder and be deemed to have offered to sell to the other shareholders his, her, or its shares of the Stock otherwise to be Transferred, at the Agreement Price (defined below) and on the Agreement Terms (defined below). Such notice shall include the name, address (both home and office) of the creditor, the amount of the debt, the date on which it was incurred, a true and accurate copy of the note or other debt instrument and any documents by which the Encumbrance is established, and any other facts that are or would reasonably be deemed material to the Encumbrance.
1.2.2. The other Shareholder shall have sixty (60) days from such notice in which to elect to buy all or any of the Offered Stock (defined below). The other Shareholders may elect to buy such shares of the Offered Stock in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
1.2.3. If the other Shareholders shall fail to cure said default within the option period, the creditor may take legal or equitable title to such shares through whatever legal remedies he, she, or it may have. The provisions of this subsection 1.2 are not intended to expand or affirm the legal rights of any such secured creditor.
[Option C--Encumbrances Permitted, Shareholders Must Buy]
1.2. Encumbrances, Shareholders Must Buy. A Shareholder may not Encumber any of his, her, or its shares of the Stock in connection with any debt, except pursuant to this subsection 1.2.
1.2.1. A Shareholder may Encumber any of his, her, or its shares of the Stock, if the person to whom would be owed the debt secured by such Encumbered shares of the Stock would, upon any default on such secured debt, be required to send a notice to each other Shareholder and be deemed to have offered to sell to the other shareholders his, her, or its shares of the Stock otherwise to be Transferred, at the Agreement Price (defined below) and on the Agreement Terms (defined below).
1.2.2. Such notice shall include the name, address (both home and office) of the creditor, the amount of the debt, the date on which it was incurred, a true and accurate copy of the note or other debt instrument and any documents by which the Encumbrance is established, and any other facts that are or would reasonably be deemed material to the Encumbrance.
1.2.3. The other Shareholders shall accept such offer and shall buy all of the Offered Stock (defined below), in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
1.2.4. The provisions of this subsection are not intended to expand or affirm the legal rights of any such secured creditor.
[Voluntary Lifetime Transfers--Mandatory--Choose one]
[Option A--Voluntary Lifetime Transfers Not Permitted]
1.3. Voluntary Lifetime Transfers Not Permitted. A Shareholder may not make a Voluntary Lifetime Transfer (defined below) of any or all of his, her, or its shares of the Stock.
[Option B--Voluntary Lifetime Transfers Permitted, Shareholder Option to Buy]
1.3. Voluntary Lifetime Transfers, Purchase Option. A Shareholder may not make a Voluntary Lifetime Transfer (defined below), except pursuant to this subsection 1.3. Any Shareholder who wishes to make any Voluntary Lifetime Transfer must promptly send a notice to each other Shareholder and be deemed to have offered to sell to the other shareholders his, her, or its shares of the Stock otherwise to be Transferred, at the Agreement Price (defined below) and on the Agreement Terms (defined below). Such notice shall include a statement of the type of proposed Transfer, the name, address (both home and office), and business or occupation of the person to whom such shares of the Stock would be Transferred, and any other facts that are or would reasonably be deemed material to the proposed Transfer.
1.3.1. The other Shareholders shall have sixty (60) days from such notice in which to elect to buy all, but not less than all, of the Offered Stock (defined below), in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
1.3.2. If the other Shareholders do not agree to buy in the aggregate all of the Offered Stock within the option period, such Voluntary Lifetime Transfer may be completed. If a Voluntary Lifetime Transfer is not consummated within thirty (30) days after the expiration of the option period, the provisions of this Agreement shall again apply to such Offered Stock as if no such Voluntary Lifetime Transfer had been contemplated and no notice had been given. A Voluntary Lifetime Transfer is consummated when ACME has been given notice that legal title to the shares of the Stock has been Transferred, subject to recordation on its books.
[Option C--Voluntary Lifetime Transfers Permitted With Bona Fide Offer, Shareholder Option to Buy]
1.3. Voluntary Lifetime Transfer With Bona Fide Offer, Purchase Option. A Shareholder may make a Voluntary Lifetime Transfer (defined below) only pursuant to a Bona Fide Offer (defined below). Any Shareholder who receives and wishes to accept any Bona Fide Offer must promptly send a notice to each other Shareholder and be deemed to have offered to sell to the other Shareholders his, her, or its shares of the Stock otherwise to be Transferred, at the Agreement Price (defined below) and on the Agreement Terms (defined below).
1.3.1. Such notice shall include a statement of the details of the proposed Transfer, the name, address (both home and office), and business or occupation of the person to whom such Transfer would be made, the price to be paid and the terms and conditions of such payment, and any other facts that are or would reasonably be deemed material to the proposed Transfer.
1.3.2. The other Shareholders shall have sixty (60) days from such notice in which to elect to buy all, but not less than all, of the Offered Stock (defined below), in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
1.3.3. If the other Shareholders do not agree to buy in the aggregate all of the Offered Stock within the option period, such Voluntary Lifetime Transfer may be completed. If a Voluntary Lifetime Transfer is not consummated within thirty (30) days after the expiration of the option period, the provisions of this Agreement shall again apply to such Offered Stock as if no such Voluntary Lifetime Transfer had been contemplated and no notice had been given. A Voluntary Lifetime Transfer is consummated when ACME has been given notice that legal title to the shares of the Stock has been Transferred, subject to recordation on its books.
[Option D--Voluntary Lifetime Transfers Permitted With Bona Fide Offer, Shareholders Must Buy]
1.3. Voluntary Lifetime Transfers With Bona Fide Offer, Shareholders Must Buy. A Shareholder may make a Voluntary Lifetime Transfer (defined below) only pursuant to a Bona Fide Offer (defined below). A Shareholder who receives and wishes to accept a Bona Fide Offer shall promptly send a notice to each other Shareholder and be deemed to have offered to sell to the other shareholders his, her, or its shares of the Stock otherwise to be Transferred, at the Agreement Price (defined below) and on the Agreement Terms (defined below).
1.3.1. Such notice shall include a statement of the details of the proposed Transfer, the name, address (both home and office), and business or occupation of the person to whom such Transfer would be made, the price to be paid and the terms and conditions of such payment, and any other facts that are or would reasonably be deemed material to the proposed Transfer.
1.3.2. The other Shareholders shall accept such offer and shall buy all of the Offered Stock (defined below), in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
[Involuntary Lifetime Transfers--Mandatory--Choose one]
[Option A--Involuntary Lifetime Transfers Permitted, Shareholder Option to Buy]
1.4. Involuntary Lifetime Transfers, Purchase Option. Any Shareholder who has any information that would reasonably lead him, her, or it to expect that an Involuntary Lifetime Transfer (defined below) is foreseeable must promptly send a notice to each other Shareholder and be deemed to have offered to sell to the other Shareholders his, her, or its shares of the Stock otherwise to be Transferred, at the Agreement Price (defined below) and on the Agreement Terms (defined below). Such notice shall include a statement of the type of proposed Transfer, the name, address (both home and office), and business or occupation of the person to whom such shares of the Stock would be Transferred, and any other facts that are or would reasonably be deemed material to the proposed Transfer.
1.4.1. The other Shareholders shall have sixty (60) days from such notice in which to elect to buy all, but not less than all, of the Offered Stock (defined below), in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
1.4.2. If the other Shareholders do not agree to buy in the aggregate all of the Offered Stock within the option period, such Involuntary Lifetime Transfer may be completed. If an Involuntary Lifetime Transfer is not consummated within thirty (30) days after the expiration of the option period, the provisions of this Agreement shall again apply to such Offered Stock as if no such Involuntary Lifetime Transfer had been contemplated and no notice had been given. An Involuntary Lifetime Transfer is consummated when ACME has been given notice that legal title to the shares of the Stock has been Transferred, subject to recordation on its books.
[Option B--Involuntary Lifetime Transfers, Shareholders Must Buy]
1.4. Involuntary Lifetime Transfers, Shareholders Must Buy. Any Shareholder who has any information that would reasonably lead him, her, or it to expect that an Involuntary Lifetime Transfer (defined below) is foreseeable must promptly send a notice to each other Shareholder and be deemed to have offered to sell to the other Shareholders his, her, or its shares of the Stock otherwise to be Transferred, at the Agreement Price (defined below) and on the Agreement Terms (defined below).
1.4.1. Such notice shall include a statement of the type of proposed Transfer, the name, address (both home and office), and business or occupation of the person to whom such shares of the Stock would be Transferred, and any other facts that are or would reasonably be deemed material to the proposed Transfer.
1.4.2. The other Shareholders shall accept such offer and shall buy all of the Offered Stock (defined below), in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
[Termination of Employment--Optional--Choose one or none]
[Option A--Termination of Employment--Shareholder Option to Buy]
1.5. Termination of Employment, Purchase Option. The parties desire to limit the ownership of the Stock to Employee-Shareholders (defined below), it being in the best interests of ACME and the Shareholders. Therefore, it is agreed that any Shareholder who, at any time, ceases to be an Employee-Shareholder as a result of voluntary termination of employment, termination of employment by the mutual consent of the Shareholder and ACME, termination of employment by ACME for Adequate Cause (defined below), or because the Shareholder is a Disabled Shareholder (defined below), shall be deemed to have offered to sell all of his or her shares of the Stock to the other Shareholders for the Agreement Price (defined below) and on the Agreement Terms (defined below). Such offer shall be deemed made on the date on which the Offering Shareholder ceased to be an Employee Shareholder.
1.5.1. The other Shareholders shall have sixty (60) days from such offer in which to elect to buy all, but not less than all, of the Offered Stock, in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
1.5.2. If the other Shareholders shall in the aggregate decline to buy all of the Offered Stock, then the Offered Stock may be retained by the Offering Shareholder, but such shares shall remain subject to all provisions of this Agreement, other than this subsection 1.5.
1.5.3. Nothing in this Agreement imposes any obligation on ACME to employ any Shareholder.
[Option B--Termination of Employment--Shareholders Must Buy]
1.5. Termination of Employment, Shareholders Must Buy. The parties desire to limit the ownership of the Stock to Employee-Shareholders (defined below), it being in the best interests of ACME and the Shareholders. Therefore, it is agreed that any Shareholder who, at any time, ceases to be an Employee-Shareholder as a result of voluntary termination of employment, termination of employment by the mutual consent of the Shareholder and ACME, termination of employment by ACME for Adequate Cause (defined below), or because the Shareholder is a Disabled Shareholder (defined below), shall be deemed to have offered to sell all of his or her shares of the Stock to the other Shareholders for the Agreement Price and on the Agreement Terms. Such offer shall be deemed made on the date on which such Shareholder ceased to be an Employee-Shareholder. The other Shareholders shall accept such deemed offer and buy all of the Offered Stock, in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon. Nothing in this Agreement imposes any obligation on ACME to employ any Shareholder.
[Option C--Termination of Employment--Corporation Is Law Firm]
1.5. Termination of Employment, Other Shareholders Must Buy. The parties desire to limit the ownership of the Stock to Employee-Shareholders (defined below), it being in the best interests of ACME and the Shareholders. Therefore, it is agreed that any Shareholder who, at any time, ceases to be an Employee-Shareholder as a result of voluntary termination of employment, termination of employment by the mutual consent of the Shareholder and ACME, termination of employment by ACME for Adequate Cause (defined below), because the Shareholder is a Disabled Shareholder (defined below), or because of the surrender, revocation, or suspension by the applicable organization or entity of the Shareholder's license to practice law within [state], whether or not appeal may be pending, and whether or not such Shareholder may remain employed by ACME in some capacity other than as a professional, shall be deemed to have offered to sell all of his, her, or its shares of the Stock to the other Shareholders for the Agreement Price and on the Agreement Terms. Such offer shall be deemed made on the date on which such Shareholder ceased to be an Employee-Shareholder. The other Shareholders shall accept such deemed offer and buy all of the Offered Stock in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportions as they shall agree upon. Nothing in this Agreement imposes any obligation on ACME to employ any Shareholder.
[Transfers at Death--Mandatory--Choose one]
[Option A--Transfers at Death--Shareholder Option to Buy]
1.__. Transfers at Death, Purchase Option. On the death of any Shareholder, his or her Personal Representative (defined below) shall immediately be deemed to have offered to sell to the other Shareholders all of the deceased Shareholder's shares of the Stock at the Agreement Price and on the Agreement Terms.
1.__.1. The other Shareholders shall have sixty (60) days from such notice in which to elect to buy all, but not less than all, of the Offered Stock, in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
1.__.2. If the other Shareholders do not, in the aggregate, agree to buy all of the Offered Stock within the option period, the Personal Representative of the deceased Shareholder may distribute such shares of the Stock to the person or persons entitled to receive such portion of the estate of the deceased Shareholder, under applicable state law. Such person or persons shall receive such shares subject to the terms of this Agreement, and only if such person or persons agree in writing to be parties to this Agreement.
[Option B--Transfers at Death--Shareholders Must Buy]
1.__. Transfers at Death, Shareholders Must Buy. On the death of any Shareholder, his or her Personal Representative (defined below) shall immediately be deemed to have offered to sell to the other Shareholders all of the deceased Shareholder's shares of the Stock at the Agreement Price and on the Agreement Terms. The other Shareholders shall accept such offer and agree to buy such shares of the Offered Stock, in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
[‟Put” Rights--Optional--Choose one or none]
[Option A--‟Put” Rights--Shareholder May Require Other Shareholders to Buy Stock at Any Time and for Any Reason]
1.__. Right to Require Other Shareholders to Buy Stock. The parties agree that a Shareholder may justifiably wish to sell his, her, or its shares of the Stock to the other Shareholders, and the parties agree that the other Shareholders should effect such sales. Therefore, any Shareholder may at any time require the other Shareholders to buy all, but not less than all, of his, her, or its shares of the Stock, on the Agreement Terms and at the Agreement Price. Each Shareholder may exercise the rights under this subsection 1. by written notice given to each other Shareholder. The other Shareholders shall buy all of the Offering Shareholder's shares of the Stock within thirty (30) days of such notice, in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
[Option B--‟Put” Rights--Shareholder May Require Other Shareholders to Buy Stock in Specific Situations]
1.__. Limited Right to Require Other Shareholders to Buy Stock. The parties agree that a Shareholder may justifiably wish to sell his, her, or its shares of the Stock to the other Shareholders, and the parties agree that the Shareholders should effect such sales. Therefore, during any Option Period (defined below), any Shareholder may at any time require the other Shareholders to buy all, but not less than all, of his, her, or its shares of the Stock, on the Agreement Terms and at the Agreement Price. Each Shareholder may exercise the rights under this subsection 1. by written notice given to each other Shareholder. The other Shareholders shall buy all of the Offering Shareholder's shares of the Stock within thirty (30) days of such notice, in proportion to their respective ownership of the Stock (excluding the Offered Stock), or in such other proportion as they shall agree upon.
[‟Call” Rights--Optional--Choose one or none]
[Option A--‟Call” Right--Other Shareholders Can Require Shareholder to Sell at Any Time]
1.__. Right to Require Shareholder to Sell Stock. Circumstances may exist under which the interests of ACME and its Shareholders shall be best served if a Shareholder or group of Shareholders owning shares of the Stock representing more than fifty percent (50%) of the combined voting power of all classes of the Stock possessing a power to vote on the election of directors (the ‟Majority Shareholders”) can buy the shares of the Stock owned by any other one (1) or more of the Shareholders. Therefore, the Majority Shareholders, however constituted, may require any other Shareholder or other Shareholders to sell to the Majority Shareholders all of such other Shareholder's (or other Shareholders' shares of the Stock, at the Agreement Price and on the Agreement Terms.
1.__.1. The Majority Shareholders may exercise their rights under this subsection 1. by written notice given to each of the Shareholders whose shares are to be bought. Such notice shall be valid only if accompanied by delivery to ACME's secretary of the cash and/or promissory notes required to buy such shares of the Stock.
1.__.2. The Shareholder (or Shareholders) whose shares are to be bought under this subsection 1. shall, within thirty (30) days of the notice required under this subsection 1.__, deliver to ACME's secretary certificates representing such Shareholder's (or Shareholders' shares of the Stock duly endorsed and free and clear of all liens, claims, or encumbrances, with evidence of payment of any applicable transfer taxes and fees. ACME's secretary shall give such Shareholder (or Shareholders) the purchase price, as provided in the section entitled ‟Agreement Terms,” and shall cancel such shares.
[Option B--‟Call” Right--Other Shareholders Can Require Shareholder to Sell in Special Circumstances]
1.__. Limited Right to Require Shareholder to Sell Stock. A prolonged Deadlock (defined below) among ACME's directors or Shareholders would have an adverse impact on ACME and the Shareholders. Therefore, during any Deadlock, a Shareholder or group of Shareholders owning shares of the Stock representing more than fifty percent (50%) of the combined voting power of all classes of the Stock possessing a power to vote on the election of directors (the ‟Majority Shareholders”), however constituted, may require any other Shareholder or other Shareholders to sell to the Majority Shareholders all of such other Shareholder's (or other Shareholders' shares of the Stock, at the Agreement Price and on the Agreement Terms.
1.__.1. The Majority Shareholders may exercise their rights under this subsection 1. by written notice given to each of the Shareholders whose shares are to be bought. Such notice shall be valid only if accompanied by delivery to ACME's secretary of the cash and/or promissory notes required to buy such shares of the Stock.
1.__.2. The Shareholder (or Shareholders) whose shares are to be bought under this subsection 1. shall, within thirty (30) days of the notice required under this subsection 1.__, deliver to ACME's secretary certificates representing such Shareholder's (or Shareholders' shares of the Stock duly endorsed and free and clear of all liens, claims, or encumbrances, with evidence of payment of any applicable transfer taxes and fees. ACME's secretary shall give such Shareholder (or Shareholders) the purchase price, as provided in the section entitled ‟Agreement Terms,” and shall cancel such shares.
[Tag-Along Clause--Optional]
1.__. Limit on Sale of the Stock of ADAM CLIENT. The value of the Stock of each of the Shareholders is enhanced by the control over ACME's affairs exercised by ADAM CLIENT. Therefore, in addition to all other conditions of all other provisions of this section 1, ADAM CLIENT shall not effect any Transfer resulting in one (1) individual or entity owning directly or indirectly shares of the Stock representing more than fifty percent (50%) of the Stock, unless such Transferee (defined below) also buys all of the shares of the Stock of each other Shareholder for the amount described in this subsection 1.__.
1.__.1. Notwithstanding any provision of section 2, the purchase of the Stock of a Shareholder other than ADAM CLIENT under this subsection 1.__, shall be made on the Agreement Terms. The amount that must be paid for such shares of the Stock shall be proportionate to the amount paid for ADAM CLIENT's shares of the Stock, based on the number of shares owned by ADAM CLIENT and by the other Shareholders, with no premiums or discounts. The amount paid for ADAM CLIENT's shares of the Stock shall include the present value of all additional consideration paid to ADAM CLIENT as incentive for ADAM CLIENT to sell his shares of the Stock, including (but not limited to) any amount paid under side agreements, consulting contracts, employment contracts, or other agreements. In determining the amount paid for the shares of the Stock of ADAM CLIENT, amounts paid under any exclusive employment or consulting agreements shall be considered only to the extent they exceed one hundred and twenty-five percent (125%) of the average salary (including bonuses) received by ADAM CLIENT from ACME during the two (2) fiscal years most recently then ended. The present value of all such amounts shall be determined using a discount rate equal to the applicable federal rate determined by the U.S. Department of the Treasury on the date of the offer to buy ADAM CLIENT's shares of the Stock. The present value of all such amounts shall also be discounted for purposes of this subsection to account for any unfavorable differential in the income tax treatment of such payments as compared to the income tax treatment of payments for the sale of shares of the Stock.
1.__.2. The amount paid under this subsection 1. to a Shareholder (other than ADAM CLIENT) who disputes the amount the prospective Transferee proposes to pay for the Shareholder's shares of the Stock, shall be determined by the majority vote of a panel of three (3) independent certified public accountants (‟CPAs”). The prospective selling Shareholder shall have the opportunity to select one (1) such independent CPA, ADAM CLIENT shall have the opportunity to select one (1) such independent CPA, and these two (2) CPAs shall select a third independent CPA. If either party fails to select a CPA within fifteen (15) days from the date of the offer to buy the Stock of the objecting Shareholder, the CPA who was selected shall make the determination alone. The CPA(s) authorized to make this determination shall evaluate all amounts being paid to ADAM CLIENT under all relevant agreements. These CPA(s) shall, within twenty (20) business days from the date the last of them was selected, render a written opinion of the amount that is due to be paid under this subsection 1.__. Their decision shall be final and binding on all of the parties, and all of the parties agree to cooperate fully in obtaining all information requested by the CPA(s). The fees of the CPA(s) shall be borne entirely by ACME.
1.__.3. Each Shareholder who has made an objection under this subsection 1. may decline to sell his, her, or its shares of the Stock pursuant to this subsection 1.__, by a signed written notice delivered to the Transferee at least fifteen (15) business days prior to the date of the closing of the sale of ADAM CLIENT's shares of the Stock.
[Slice-of-the-Pie Clause--Optional, but use only when there are just two shareholders]
1.__. Special Purchase Offer. In order to prevent the injury that might occur to ACME in case of a prolonged discord between the Shareholders, in addition to all other restrictions contained in this Agreement, either Shareholder may at any time send to the other Shareholder a Special Purchase Notice. A Special Purchase Notice is a written notice by which the Offering Shareholder offers to buy all of the other Shareholder's shares of the Stock for a price stated in the Special Purchase Notice, which price shall be the Agreement price for purposes of this section 1.__, and on terms that shall include full payment at closing by good check, and that shall, for purposes of this section 1.__, be the Agreement Terms. A Special Purchase Notice is valid only if accompanied by the Offering Shareholder's deposit with an Escrow Agent of certificates representing all of the shares of the Stock owned by the Offering Shareholder, and the Offering Shareholder's good personal check for the entire purchase price.
1.__.1. The other Shareholder shall have ninety (90) days from the Special Purchase Notice either to accept the offer or, at the other Shareholder's sole option, reject the offer by agreeing instead to buy all of the Offering Shareholder's shares of the Stock, for the Agreement Price and on the Agreement Terms. Failure to respond to the Special Purchase Notice within ninety (90) days shall constitute the other Shareholder's acceptance of the offer and agreement to sell all of the other Shareholder's shares of the Stock.
1.__.2. The other Shareholder may accept the offer and agree to sell all of such other Shareholder's shares of the Stock to the Offering Shareholder by delivering to the Escrow Agent certificates representing all of the other Shareholder's shares of the Stock, within ninety (90) days from the date of the Special Purchase Notice. Upon acceptance of the offer by the other Shareholder, the Escrow Agent shall do or cause to be done the following:
A. First, transfer the other Shareholder's shares of the Stock to the Offering Shareholder or, if the other Shareholder has not yet provided the Escrow Agent with certificates representing such shares of the Stock, direct ACME's Secretary (who shall follow such direction), to cancel the other Shareholder's shares of the Stock on ACME's books and to issue an equal number of additional shares to the Offering Shareholder;
B. Second, deliver to the other Shareholder the Offering Shareholder's check for the Agreement Price;
C. Third, deliver to the Offering Shareholder the certificates for the Offering Shareholder's own shares of the Stock originally deposited with the Escrow Agent; and
D. Fourth, terminate the escrow, at which time the Escrow Agent shall be released from all duties and responsibilities.
1.__.3. The other Shareholder may reject the Special Purchase Offer and evidence a decision to buy the Offering Shareholder's shares of the Stock by delivering to the Escrow Agent a good personal check made payable to the Offering Shareholder for the Agreement Price within ninety (90) days from the Special Purchase Notice. Upon receipt of such check by the Escrow Agent, the Escrow Agent shall do or cause to be done the following:
A. First, transfer the Offering Shareholder's shares of the Stock to the other Shareholder;
B. Second, deliver to the Offering Shareholder the other Shareholder's check for the Agreement Price, and the Offering Shareholder's check originally deposited with the Escrow Agent;
C. Third, terminate the escrow, at which time the Escrow Agent shall be released from all duties and responsibilities.
1.__.4. All fees charged by the Escrow Agent shall be paid by ACME, regardless of which Shareholder sells or buys any shares of the Stock.
[Agreement Price--Mandatory--Choose one]
[Option A--Agreement Price--Fixed]
SECTION 2
Agreement Price
The Agreement Price shall be [amount] per share.
[Option B--Agreement Price--Fixed, With Annual Revaluation]
SECTION 2
Agreement Price
The Agreement Price for each share of the Stock shall be [amount] per share, as adjusted under this section 2.
2.1. Annual Revisions. The Shareholders shall meet at least annually and shall review the Agreement Price. The Shareholders shall modify the Agreement Price to reflect any figure that they unanimously agree to be the then current fair market value of the Stock. Such modification or retention of the existing value shall be reflected on a special schedule to this Agreement.
2.2. Automatic Adjustment. If the Shareholders have not unanimously agreed under subsection 2.1 to a modification of the Agreement Price during a fiscal year (or unanimously agreed that the present Agreement Price still reflects the fair market value of the shares of the Stock), then at the end of each such fiscal year, then the Agreement Price, as most recently adjusted, shall be increased by a factor equal to the short-term applicable federal rate set by the Internal Revenue Service under Section 1274 of the Code (defined below), and applicable on the last day of such fiscal year.
[Option C--Agreement Price--Set by Appraisal by Corporation's CPA]
SECTION 2
Agreement Price
The Agreement Price shall be the fair market value of the shares of the Offered Stock on the date of any deemed offer, as determined under this section 2.
2.1. How Computed. The Agreement Price shall be the fair market value of the shares of the Offered Stock as determined by the independent certified public accountant (‟CPA”) regularly employed by ACME or, if ACME has no regularly employed CPA, a CPA selected by ACME for this purpose. This valuation shall be determined under the same methods as would be used for determining the estate tax value of the Offered Stock if the Offering Shareholder (defined below) had died on the date the offer was deemed made, ignoring any alternate valuation date (under Section 2032 of the Code (defined below)) or special use valuation (under Code Section 2032A). ACME shall provide such data as the CPA deems necessary or useful to make such determination of the fair market value of the Offered Stock.
2.2. Cost of Determination. The fees and reimbursed expenses charged by the CPA in the valuation under this section 2 shall be borne solely by ACME.
[Option D--Agreement Price--Set by Average of Appraisals by Appraisers Chosen by Selling and Buying Shareholder]
SECTION 2
Agreement Price
The Agreement Price shall be the fair market value of the Offered Stock on the date of any deemed offer, determined under this section 2.
2.1. How Computed. The fair market value of the Offered Stock shall be determined under the same methods as would be used for determining the estate tax value of the Offered Stock if the Offering Shareholder (defined below) had died on the date of any deemed offer, ignoring any alternate valuation date (under Section 2032 of the Code (defined below)) or special use valuation (under Code Section 2032A).
2.1.1. The fair market value of the Offered Stock shall be that price that is mutually agreed upon by the Shareholders.
2.1.2. If Shareholders are unable to agree mutually on the fair market value of the Offered Stock within ten (10) days from the date of the deemed offer, the fair market value of the Offered Stock shall be determined by one (1) or more Qualified Appraisers, selected under the procedures in this section 2.
2.1.3. If the fair market value of the Offered Stock is to be determined by Qualified Appraisers, the Offering Shareholder shall have the opportunity to appoint one (1) Qualified Appraiser at his, her, or its own expense, within five (5) days following the expiration of the ten (10)-day period within which the Shareholders could not mutually agree on the fair market value. The other Shareholders, in the aggregate, shall have the opportunity to appoint one (1) Qualified Appraiser at their own expense, within five (5) days following the expiration of the ten (10)-day period within which the Shareholders could not mutually agree on the fair market value. If the Offering Shareholder or the other Shareholders shall fail to appoint a Qualified Appraiser within this five (5)-day period, the other Qualified Appraiser shall unilaterally establish the fair market value of the Offered Stock by a written opinion.
2.1.4. If two (2) Qualified Appraisers shall have been appointed within this five (5)-day period, these two (2) Qualified Appraisers shall establish the fair market value of the Offered Stock in a single written opinion agreed to by both of them.
2.1.5. If these two (2) Qualified Appraisers cannot agree on the fair market value of the Offered Stock within ten (10) days of the appointment of the later of them, they shall each prepare an independent appraisal, and the average of the fair market value determined under these two (2) appraisals shall be the Agreement Price.
2.2. Cooperation by ACME. ACME shall provide such data as any Qualified Appraiser deems necessary or useful to make such determination of the fair market value of the Offered Stock.
[Option E--Agreement Price--Set at Adjusted Book Value]
SECTION 2
Agreement Price
The Agreement Price shall be the book value of the Offered Stock on the last day of the fiscal year most recently ended prior to the date of any deemed offer.
2.1. How Computed. The book value of the shares of the Offered Stock shall be determined by the independent certified public accountant (‟CPA”) regularly employed by ACME, or, if ACME has no regularly employed CPA, by a CPA selected by ACME for this purpose. The book value of the Offered Stock shall be the net book value of the Offered Stock, based on the information shown on ACME's books on the last day of the fiscal year ending most recently before the date of any deemed offer.
2.1.1. The book value of the Offered Stock shall be determined in accordance with the regular financial statements prepared by the ACME and in accordance with generally accepted accounting principles consistently applied.
2.1.2. In making this determination, book value shall be adjusted to reflect:
A. An increase to the face amount in the value of any life insurance, of which ACME is the beneficiary, on the life of a Shareholder whose shares of the Stock are being bought on account of his or her death;
B. An increase in the value of any tangible assets with a useful life in excess of five (5) years to their fair market value;
C. The valuation of all inventory on the FIFO (first-in, first-out) method; and
D. A reasonable adjustment to reflect the fair market value of any goodwill or other intangible assets, whether or not ACME has any income tax basis in such assets.
2.1.3. ACME shall provide such data as the CPA deems necessary or useful to make such determination of the fair market value of the Offered Stock.
2.2. Cost of Determination. The fees and reimbursed expenses charged by the CPA in the valuation under this section 2 shall be borne equally by the Offering Shareholder (one-half (1/2)) and the other Shareholders (in the aggregate, one-half (1/2)).
[Option F--Agreement Price--Set by Capitalized Three Years' Earnings]
SECTION 2
Agreement Price
The Agreement Price shall be the value of the Offered Stock on the last day of the fiscal year most recently ended prior to the date of any deemed offer.
2.1. How Computed. The value of the Offered Stock shall be determined by the independent certified public accountant (‟CPA”) regularly employed by ACME, or, if ACME has no regularly employed CPA, by a CPA selected by ACME for this purpose. The value of each share of the Offered Stock shall be five (5) times the unweighted average of ACME's earnings per share, based on the three (3) most recently ended fiscal years.
2.1.1. The earnings per share shall be determined from ACME's financial statements in accordance with the regular financial statements prepared by ACME and in accordance with generally accepted accounting principles consistently applied.
2.1.2. In making this determination, earnings per share shall be adjusted to reflect:
A. No deemed earnings on account of the receipt of any life insurance on the life of a Shareholder whose shares of the Stock are being or have been bought on account of his or her death;
B. Calculation of depreciation on the straight-line method;
C. The valuation of all inventory on the FIFO (first-in, first-out) method; and
D. The elimination of any past service pension cost charges.
2.1.3. ACME shall provide such data as the CPA deems necessary or useful to make such determination of the fair market value of the Offered Stock.
2.2. Cost of Determination. The fees and reimbursed expenses charged by the CPA in the valuation under this section 2 shall be borne equally by the Offering Shareholder (one-half (1/2)) and the other Shareholders (in the aggregate, one-half (1/2)).
[Option G--Agreement Price--Set by Weighted Capitalization of Three Years' Earnings]
SECTION 2
Agreement Price
The Agreement Price shall be the value of the Offered Stock on the last day of the fiscal year most recently ended prior to the date of any deemed offer.
2.1. How Computed. The value of the Offered Stock shall be determined by the independent certified public accountant (‟CPA”) regularly employed by ACME, or, if ACME has no regularly employed CPA, by a CPA selected by ACME for this purpose. The value of each share of the Offered Stock shall be five (5) times the weighted average of ACME's earnings per share, based on the three (3) most recently ended fiscal years.
2.1.1. In determining the weighted average earnings per share over the three (3) most recently ended fiscal years, the most recently ended year shall be most heavily weighted, the next most recently ended year shall be next most heavily weighted, and the third most recently ended year shall be least heavily weighted. The weighted average earnings per share shall be equal to one sixth (1/6) of the following sum: (3 × the earnings per share for the most recently completed year) + (2 × the earnings per share for the next most recently completed year) + (1 × the earnings per share for the third most recently completed year).
2.1.2. The earnings per share shall be determined from ACME's financial statements in accordance with the regular financial statements prepared by ACME and in accordance with generally accepted accounting principles consistently applied.
2.1.3. In making this determination, earnings per share shall be adjusted to reflect:
A. No deemed earnings on account of the receipt of any life insurance on the life of a Shareholder whose shares of the Stock are being or have been bought on account of his or her death;
B. Calculation of depreciation on the straight-line method;
C. The valuation of all inventory on the FIFO (first-in, first-out) method; and
D. The elimination of any past service pension cost charges.
2.1.4. ACME shall provide such data as the CPA deems necessary or useful to make such determination of the fair market value of the Offered Stock.
2.2. Cost of Determination. The fees and reimbursed expenses charged by the CPA in the valuation under this section 2 shall be borne equally by the Offering Shareholder (one-half (1/2)) and the other Shareholders (in the aggregate, one-half (1/2)).
[Agreement Price--Revaluation if Bought Stock Resold Within Twenty-Four Months--Optional]
2.3. Price Adjustment in Case of Resale. Notwithstanding any other provision of section 2, if any buying Shareholder shall sell any of the shares of the Stock that he, she, or it bought pursuant to this Agreement, within twenty-four (24) months following the closing date on such sale, the Agreement Price for the initial sale of the Stock shall be increased to the same price per share at which any of the Stock is sold at such subsequent sale, if the price per share at such subsequent sale is more than twenty percent (20%) greater than the Agreement Price at which the Offered Stock was sold at the first sale, without regard to any adjustments under this subsection 2.3. If the price per share at which the Stock is sold at such second sale is not more than twenty percent (20%) greater than the Agreement Price at which the Offered Stock was sold at such earlier sale, there shall be no adjustment under this subsection 2.3 in the Agreement Price for such earlier sale.
[Agreement Price--Revaluation Clauses--Optional--Choose one or none]
[Option A--Agreement Price--Revaluation Clause--Similar to Clause Used in King Case]
2.__. Revaluation. The Agreement Price is intended to be the fair market value of the Offered Stock, but if the Agreement Price under subsection 2.1 is ever determined by the U.S. Internal Revenue Service to be greater or less than its fair market value, the Agreement Price shall be adjusted to the fair market value determined by the U.S. Internal Revenue Service.
[Option B--Agreement Price--Revaluation Clause--Similar to Clause in Dickenson Case]
2.__. Revaluation. The Agreement Price is intended to reflect the fair market value of the Stock. However, if the U.S. Internal Revenue Service should take an action which would disregard for estate tax valuation purpose the Agreement Price set under subsection 2.1 with respect to the estate of a deceased Shareholder, or take an action which would in effect deny the benefits of Section 303 of the Code (defined below), and thereby be contradictory to the intentions of Congress in enacting Code Section 303 governing the redemption of stock to pay death taxes, the Personal Representative of the estate of the deceased Shareholder may, if the Personal Representative, in his, her, or its sole discretion, shall deem such action by the U.S. Internal Revenue Service to threaten a damaging result either to the estate, heirs, devisees and legatees of the deceased Shareholder, or to the remaining Shareholders, request to be relieved of the estate's obligation to sell said stock pursuant to this Agreement, and each Shareholder agrees that, upon receipt of such request, he, she, or it shall release the estate of the deceased Shareholder from such obligations as it may have under this Agreement.
[Agreement Price--Excess Life Insurance--Optional--Choose one or none]
[Option A--Agreement Price--Excess Life Insurance--Excess Paid to Remaining Shareholders]
2.__. Life Insurance. Any proceeds of the policy of insurance that must be maintained on the life of the deceased Shareholder under the section entitled ‟Life Insurance,” in excess of the Agreement Price under subsection 2.1, shall be paid to and become the property of the beneficiary of such policy.
[Option B--Agreement Price--Excess Life Insurance--Excess Paid to Seller]
2.__. Life Insurance. The Agreement Price for the shares of the Stock of a deceased Shareholder shall, notwithstanding subsection 2.1, in all events be at least equal to the proceeds of the policy of insurance that must be maintained on the life of the deceased Shareholder under the section entitled ‟Life Insurance.”
[Agreement Terms--Mandatory--Choose one]
[Option A--Agreement Terms--Sale for Cash]
SECTION 3
Agreement Terms
3.1. Type of Payment. The buyers shall pay the Agreement Price in cash or by good check.
3.2. The Closing. The purchase of the Offered Stock pursuant to this Agreement shall take place at a closing, held at 1:00 P.M. on the thirtieth (30th) day after the date on which the last option to buy has expired or been executed, or on which the last buyer becomes obligated to buy the Offered Stock, at ACME's primary place of business, or at any other place to which the parties agree.
3.2.1. At the closing, the buyers shall pay for the Offered Stock and the Offering Shareholder shall deliver certificates representing all of the shares of the Offered Stock, duly endorsed, free and clear of all Encumbrances, and with evidence of payment of all necessary transfer taxes and fees.
3.2.2. If the Offering Shareholder does not deliver the certificates at the closing, then:
A. Each buyer shall deposit the purchase price by check with the Escrow Agent (defined below);
B. The Escrow Agent shall deposit such funds with any bank with which ACME has a bank account on the date of the closing, to be paid to the Offering Shareholder as soon as is reasonably practicable, less an appropriate fee to ACME (not to exceed five hundred dollars ($500.00)) to pay for the additional administrative costs; and
C. ACME shall adjust its transfer books to reflect that these shares of the Stock have been Transferred.
3.2.3. Each Shareholder appoints ACME, through its secretary or such other officer as its board of directors may designate, as the Offering Shareholder's agent and attorney-in-fact to execute and deliver all documents needed to convey the Offering Shareholder's shares of the Stock, if such Offering Shareholder is not present at the closing. This power of attorney is coupled with an interest and does not terminate on the Shareholder's disability or death, and continues for as long as this Agreement is in effect.
[Option B--Agreement Terms--Sale for Interest-Bearing Installment Note]
SECTION 3
Agreement Terms
3.1. Type of Payment. The buyers shall pay the Agreement Price in forty (40) equal quarter-annual payments of principal and interest. The first payment shall be made at the closing for the sale of the Offered Stock, and all subsequent payments shall include interest compounded annually at the applicable federal rate established under Section 1274(d) of the Code (defined below) on the date of the closing added to each installment after the first installment. Each buyer shall prepare and give the Offering Shareholder an unsecured negotiable promissory note as evidence of this debt, permitting the buyer to prepay all or any part of the principal balance of the note at any time without penalty or premium.
3.2. The Closing. The purchase of the Offered Stock pursuant to this Agreement shall take place at a closing, held at 1:00 P.M. on the thirtieth (30th) day after the date on which the last option to buy has expired or been executed, or on which the last buyer becomes obligated to buy the Offered Stock, at ACME's primary place of business, or at any other place to which the parties agree.
3.2.1. At the closing, the buyers shall pay for the Offered Stock and the Offering Shareholder shall deliver certificates representing all of the shares of the Offered Stock, duly endorsed, free and clear of all Encumbrances, and with evidence of payment of all necessary transfer taxes and fees.
3.2.2. If the Offering Shareholder does not deliver the certificates at the closing, then:
A. Each buyer shall deposit the purchase price by check or by check and note, as is appropriate under this section 3, with the Escrow Agent (defined below);
B. The Escrow Agent shall deposit such funds with any bank with which ACME has a bank account on the date of the closing, to be paid to the Offering Shareholder as soon as is reasonably practicable, less an appropriate fee to ACME (not to exceed five hundred dollars ($500.00)) to pay for the additional administrative costs; and
C. ACME shall adjust its transfer books to reflect that these shares of the Stock have been Transferred.
3.2.3. Each Shareholder appoints ACME, through its secretary or such other officer as its board of directors may designate, as the Offering Shareholder's agent and attorney-in-fact to execute and deliver all documents needed to convey the Offering Shareholder's shares of the Stock, if such Offering Shareholder is not present at the closing. This power of attorney is coupled with an interest and does not terminate on the Shareholder's disability or death, and continues for as long as this Agreement is in effect.
[Option C--Agreement Terms--Sale for Interest-Bearing Note With Down Payment Equal to Life Insurance Proceeds]
SECTION 3
Agreement Terms
3.1. Type of Payment. The buyers shall pay the Agreement Price for the Stock of a deceased Shareholder in cash or by good corporate check, to the extent of the face amount of the life insurance policies that are maintained on the life of the deceased Shareholder under the section entitled ‟Life Insurance.” The buyers shall pay the remainder of the Agreement Price (including all of the Agreement Price, if no life insurance is required to be maintained under the section entitled ‟Life Insurance” or if the sale does not occur on account of a Shareholder's death), in forty (40) equal quarter-annual payments of principal and interest. These payments shall begin on the date of the closing and shall include interest compounded annually at the applicable federal rate established under Section 1274(d) of the Code (defined below) on the closing date, added to each installment after the first installment. Each buyer shall prepare and give the Offering Shareholder a negotiable promissory note as evidence of this debt, permitting the buyer to prepay all or any part of the principal balance of the note at any time without penalty or premium.
3.2. The Closing. The purchase of the Offered Stock pursuant to this Agreement shall take place at a closing, held at 1:00 P.M. on the thirtieth (30th) day after the date on which the last option to buy has expired or been executed, or on which the last buyer becomes obligated to buy the Offered Stock, at ACME's primary place of business, or at any other place to which the parties agree.
3.2.1. At the closing, the buyers shall pay for the Offered Stock and the Offering Shareholder shall deliver certificates representing all of the shares of the Offered Stock, duly endorsed, free and clear of all Encumbrances, and with evidence of payment of all necessary transfer taxes and fees.
3.2.2. If the Offering Shareholder does not deliver the certificates at the closing, then:
A. Each buyer shall deposit the purchase price by check or by check and note, as is appropriate under this section 3, with the Escrow Agent (defined below);
B. The Escrow Agent shall deposit such funds with any bank with which ACME has a bank account on the date of the closing, to be paid to the Offering Shareholder as soon as is reasonably practicable, less an appropriate fee to ACME (not to exceed five hundred dollars ($500.00)) to pay for the additional administrative costs; and
C. ACME shall adjust its transfer books to reflect that these shares of the Stock have been Transferred.
3.2.3. Each Shareholder appoints ACME, through its secretary or such other officer as its board of directors may designate, as the Offering Shareholder's agent and attorney-in-fact to execute and deliver all documents needed to convey the Offering Shareholder's shares of the Stock, if such Offering Shareholder is not present at the closing. This power of attorney is coupled with an interest and does not terminate on the Shareholder's disability or death, and continues for as long as this Agreement is in effect.
[Option D--Agreement Terms--Sale for Self-Canceling Installment Note]
SECTION 3
Agreement Terms
3.1. Type of Payment. The buyers shall pay the Agreement Price in forty (40) equal quarter-annual payments of principal and interest, except as provided below. The first payments shall be made at the closing for the sale of the Offered Stock, and all subsequent payments shall include interest compounded annually at the applicable federal rate established under Section 1274(d) of the Code (defined below) on the date of the closing, added to each installment after the first installment.
3.1.1. Each buyer shall prepare and give the Offering Shareholder an unsecured negotiable promissory note as evidence of this debt, permitting the buyer to prepay all or any part of the principal balance of the note at any time without penalty or premium.
3.1.2. With respect to a sale of the Stock not made upon a Shareholder's death, the Offering Shareholder may, at his or her option, insist that the promissory note and the underlying obligation to pay be canceled and terminated as if paid in full upon his or her death, if such death occurs before to the note's stated maturity date. This cancellation shall not apply with respect to any overdue or late payments of principal or interest outstanding at the time of Offering Shareholder's death. Notwithstanding the provisions of this section 3, the Agreement Price for shares of the Stock sold in exchange for such a self-canceling installment note shall be increased to reflect the actuarial likelihood (based on tables of the U.S. Department of the Treasury) that the Offering Shareholder may die during the term of the obligation.
3.2. The Closing. The purchase of the Offered Stock pursuant to this Agreement shall take place at a closing, held at 1:00 P.M. on the thirtieth (30th) day after the date on which the last option to buy has expired or been executed, or on which the last buyer becomes obligated to buy the Offered Stock, at ACME's primary place of business, or at any other place to which the parties agree.
3.2.1. At the closing, the buyers shall pay for the Offered Stock and the Offering Shareholder shall deliver certificates representing all of the shares of the Offered Stock, duly endorsed, free and clear of all Encumbrances, and with evidence of payment of all necessary transfer taxes and fees.
3.2.2. If the Offering Shareholder does not deliver the certificates at the closing, then:
A. Each buyer shall deposit the purchase price by check or by check and note, as is appropriate under this section 3, with the Escrow Agent (defined below);
B. The Escrow Agent shall deposit such funds with any bank with which ACME has a bank account on the date of the closing, to be paid to the Offering Shareholder as soon as is reasonably practicable, less an appropriate fee to ACME (not to exceed five hundred dollars ($500.00)) to pay for the additional administrative costs; and
C. ACME shall adjust its transfer books to reflect that these shares of the Stock have been Transferred.
3.2.3. Each Shareholder appoints ACME, through its secretary or such other officer as its board of directors may designate, as the Offering Shareholder's agent and attorney-in-fact to execute and deliver all documents needed to convey the Offering Shareholder's shares of the Stock, if such Offering Shareholder is not present at the closing. This power of attorney is coupled with an interest and does not terminate on the Shareholder's disability or death, and continues for as long as this Agreement is in effect.
[Option E--Agreement Terms--Sale for Private Annuity]
SECTION 3
Agreement Terms
3.1. Type of Payment.
3.1.1. The buyers shall pay the Agreement Price with respect to any sale of the Stock upon the death of a Shareholder, in forty (40) equal quarter-annual payments of principal and interest. The first payments shall be made at the closing for the sale of the Offered Stock, and all subsequent payments shall include interest compounded annually at the applicable federal rate established under Section 1274(d) of the Code (defined below) on the date of the closing, added to each installment after the first installment. Each buyer shall prepare and give the seller an unsecured negotiable promissory note as evidence of this debt, permitting the buyer to prepay all or any part of the principal balance of the note at any time without penalty or premium.
3.1.2. Each buyer shall pay the Agreement Price with respect to all other sales of the Stock, in the form of an unsecured promise by the buyer to pay a fixed dollar amount monthly for the rest of the Offering Shareholder's life. These annuity payments shall in no way be contingent on any income the bought shares of the Stock may produce, and the amount of such payments shall be determined in accordance with the applicable actuarial tables promulgated by the U.S. Department of the Treasury for use in valuing annuities sold by individuals who are not in the business of regularly selling such annuities. Each buyer shall set forth the obligation to pay this annuity in a nontransferrable written private annuity agreement.
3.2. The Closing. The purchase of the Offered Stock pursuant to this Agreement shall take place at a closing, held at 1:00 P.M. on the thirtieth (30th) day after the date on which the last option to buy has expired or been executed, or on which the last buyer becomes obligated to buy the Offered Stock, at ACME's primary place of business, or at any other place to which the parties agree.
3.2.1. At the closing, the buyers shall pay for the Offered Stock and the Offering Shareholder shall deliver certificates representing all of the shares of the Offered Stock, duly endorsed, free and clear of all Encumbrances, and with evidence of payment of all necessary transfer taxes and fees.
3.2.2. If the Offering Shareholder does not deliver the certificates at the closing, then:
A. Each buyer shall deposit the purchase price by promissory note or annuity agreement, as is appropriate under this section 3, with the Escrow Agent (defined below);
B. Each buyer shall pay to ACME an appropriate fee (not to exceed five hundred dollars ($500.00)) to pay for the additional administrative costs; and
C. ACME shall adjust its transfer books to reflect that these shares of the Stock have been Transferred.
3.2.3. Each Shareholder appoints ACME, through its secretary or such other officer as its board of directors may designate, as the Offering Shareholder's agent and attorney-in-fact to execute and deliver all documents needed to convey the Offering Shareholder's shares of the Stock, if such Offering Shareholder is not present at the closing. This power of attorney is coupled with an interest and does not terminate on the Shareholder's disability or death, and continues for as long as this Agreement is in effect.
[Option F--Agreement Terms--Sale for Installments Parallel to Section 6166 Payments]
SECTION 3
Agreement Terms
3.1. Type of Payment. The buyers shall pay the Agreement Price in cash or by good corporate check, as provided in this section 3.
3.2. The Closing. The purchase of the Offered Stock pursuant to this Agreement shall take place at a closing, held at 1:00 P.M. on the thirtieth (30th) day after the date on which the last option to buy has expired or been executed, or on which the last buyer becomes obligated to buy the Offered Stock, at ACME's primary place of business, or at any other place to which the parties agree.
3.2.1. At the closing, the buyers shall pay for the Offered Stock and the Offering Shareholder shall deliver certificates representing all of the shares of the Offered Stock, duly endorsed, free and clear of all Encumbrances, and with evidence of payment of all necessary transfer taxes and fees.
3.2.2. If the Offering Shareholder does not deliver the certificates at the closing, then:
A. The buyers shall deposit the purchase price by check or by check and note, as this Agreement requires, with the Escrow Agent;
B. The Escrow Agent shall deposit such funds with any bank with which ACME has a bank account on the date of the closing, to be paid to the Offering Shareholder as soon as is reasonably practicable, less an appropriate fee to ACME (not to exceed five hundred dollars ($500.00)) to pay for the additional administrative costs; and
C. ACME shall adjust its transfer books to reflect that these shares of the Stock have been Transferred.
3.2.3. The Personal Representative of a deceased Shareholder may, but shall not be required to, elect to sell the deceased Shareholder's shares of the Stock to the other Shareholders in a series of sales, rather than in a single sale, in order that the deceased Shareholder's estate may take advantage of the estate tax deferral prov
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Jim C.
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Buy-Sell agreements can get fairly tricky and complicated, if you have access to a ICLE type site that may lead you in the right direction. But, if you are not familiar with these types of agreement, make sure you read a few to get the feel, they can get complicated.
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Mark
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Can someone direct me to a sample buy-sell agreement for S-corp shareholders? I need to know what I should be looking out for.
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